This month the U.S. and EU imposed targeted sanctions against certain individuals in Russia and Ukraine in response to Russia’s annexation of Crimea. Further sanctions are possible, although Russia has promised retaliation if broader sanctions are pursued.
The White House issued the first Executive Order (EO) in response to the crisis in Crimea on March 6, 2014. That EO authorized sanctions against individuals and entities involved in undermining the democratic process in Ukraine, threatening the peace, security, or territorial integrity of Ukraine, contributing to the misappropriation of Ukraine’s assets, or asserting governmental authority over any part of Ukraine without authorization from the Ukrainian government. The Office of Foreign Assets Control (OFAC) at the U.S. Department of Treasury declined to designate persons pursuant to the Order for a week and half as senior U.S. diplomats tried to come to an accord with Russia.
On March 17, 2014, immediately following Crimea’s referendum to secede from Ukraine, OFAC designated four individuals as Specially Designated Nationals (SDNs) pursuant to the first EO. Designated persons and the entities they own or control are barred from conducting nearly any business in the U.S. or with U.S. persons. The EO also freezes designated persons’ assets in the U.S. On the same day, the President signed a second EO allowing OFAC to designate officials of the Government of Russia and individuals and entities involved in the Russian arms industry. Individuals and entities that materially assist or provide financial support to such persons can also be subject to sanctions. Entities that are owned or controlled by or acting on behalf of a designated person are also blocked pursuant to the EO. OFAC immediately designated seven senior Russian officials as SDNs pursuant to the second EO, freezing their assets and prohibiting travel to the U.S.
While the U.S. has refrained from imposing more sweeping sanctions against Russia, the Executive Orders are broad enough to allow OFAC to target many Russian oligarchs and the companies they control, should the situation in Ukraine escalate further. The U.S. Congress may also mandate or authorize additional sanctions in the coming weeks as the body considers measures related to the situation in Ukraine. U.S. officials hope that threats of sanctions on the Russian elite will discourage President Putin from making further incursions into Ukraine.
The EU has also acted to impose sanctions against a limited set of Russian officials in response to the situation in Crimea. To date, the EU has imposed sanctions on 21 individuals, effectively freezing their assets and prohibiting travel in the EU. Many EU member states are wary of adopting more expansive sanctions that could jeopardize extensive EU business interests in Russia, Russia’s supply of energy to the Europe, and continued Russian investment in the EU.
The situation in Crimea presents the West with a difficult calculus. If tensions do not ease, or if Russia makes further territorial claims, the U.S. and EU may impose broader sanctions. Such sanctions would likely target members of the Russian elite, but would not likely amount to comprehensive economic sanctions of the type that are in force against countries such as Iran. Russia, however, has promised that an escalation of sanctions would be met with retaliatory action against U.S. and Western companies operating in Russia. Companies with business in Russia or with Russian companies should continue to monitor the situation closely and consider their exposure to further sanctions by the U.S. and EU and any potential retaliation by Russia.